December 2021: “as goes December, so goes the year”…

In the financial markets, December 2021 largely reflected FY2021 performance – outstanding for equities (particularly US and European equities), moderate to reasonable for corporate bonds and listed property, and downright poor for government bonds.

At the beginning of December, financial market sentiment was still mostly dominated by uncertainty regarding the Omicron variant of the coronavirus, but as the month progressed investor optimism regained the upper hand, in line with most of 2021. Equities in particular eventually enjoyed a strong, above average last month of an equally strong, above average trading year. In contrast to previous months, European equities emerged as the best equity region in December, with the MSCI Europe index delivering a monthly yield of +5.5%.

US equities lagged behind European equities in December

While lagging behind European equities in December, with the MSCI North America index showing a monthly yield of +3.9%, US equities did outperform European equities in the full year of 2021, at annual yields of +36.6% and +25.1%, respectively, measured in euros. The yield gap between the two regions is partly due to the appreciation of the US dollar against the euro (+7.4% in 2021), and partly due to the outperformance of US big tech shares. Meanwhile, Asian equity markets struggled more than their US and European counterparts, both in December and in FY2021. In December the MSCI Asia Pacific index returned a yield of +1.8%, and for the full year 2021 ‘only’ 6.4%. Emerging markets once again lagged behind developed equity markets, with the MSCI Emerging Markets index yielding +1.8% in December and +5.3% for the full year 2021.

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